In this series, we bust the jargon and explain a popular investing term or theme. Here it’s pandemic era winners.
Who or what are these?
The group of stocks that soared during lockdown, but are now plumbing the depths – which probably means that they should now be called post-pandemic losers. The shares of 50 technology and other businesses that prospered from pandemic trends, such as the shift to online, have together fallen by $1.3 trillion since the end of 2020. This is according to a Financial Times study based on Bloomberg data.
Name some names
The list includes Zoom Video Communications, the platform that enabled colleagues and families to stay in touch during the pandemic period. Remember the Zoom dinner party, where several households prepared the same meal and shared the experience over their screens?
Zoom shares soared to $559 by Christmas 2020, but have tumbled to $62, as a result of the return to offices and socialising in person. Last summer, Zoom ordered its own workers back into the office.
I guess peloton is on the list
Indeed it is. Shares in the exercise bike business, leapt to $162 towards the end of 2020, as the fitness-conscious were shut out of the gym. The shares are trading at $4 which is due, in part, to the high cost of its bikes and their lack of reliability. The loss-making company is now implementing a refinancing and a restructuring plan (jobs will be lost). But there are rumours that private equity bidders may be circling.
Any other names?
The pandemic raised interest in every aspect of technology and its power to solve all our problems. As part of this preoccupation, shares in electric car maker Tesla rose from $235 at Christmas 2020 to $407 in November 2021. The price is now $177. But this decline is also linked to falling sales and the controversial outbursts of Tesla boss Elon Musk.
Where did excitement about these stocks start?
People started to discuss the potential of Peloton and the other pandemic winners on the forums of the message board Reddit. The platform went public in March this year. Much enthusiasm currently surrounds its shares. Well, currently at least.
Have any of the pandemic winners bucked the trend?
Shareholders should not despair. Amazon shares stood at $162 at the end of 2020, they are now at $189.
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HOW THIS IS MONEY CAN HELP
In 2020, some investors, attracted by the potential of artificial intelligence (AI), began to buy shares in the semiconductor business Nvidia.
Its shares, which were $131 at the end of 2020, are now 569 per cent higher at $905, thanks to excitement over generative AI.
Amazon and Nvidia are members of the Magnificent Seven tech stock posse which were the favourite stocks of 2023.
Sadly, their recent performance has been dented by the decline of Tesla, another in their number.
What are the lessons of this?
The fate of the pandemic darlings illustrates the importance of diversification – in any era.
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